Effective Interest Discount Amortization Chowan Corporation issued $190,000 of 1
ID: 2420515 • Letter: E
Question
Effective Interest Discount Amortization
Chowan Corporation issued $190,000 of 10% bonds dated January 1, 2013, for $183,982.19 on Janauary 1, 2013. The bonds are due December 31, 2016, were issued to yield 11%, and pay interest semiannually on June 30 and December 31. Chowan uses the effective interest method of amortization.
In addition, prepare a bond interest expense and discount amortization schedule for the bonds through June 30, 2014.
Chowan Corporation
Bond Interest Expense and Discount Amortization Schedule (Partial)
Effective Interest Method
10% Bonds Sold to Yield 11%
Date Cash Interest Expense Unmortized Discount Book Value of Bonds Credit Debit Credit 01/01/13 $183,982.19 06/30/13 $9,500 $10,119.02 $619.02 $????? 12/31/13 $9,500 $10,153.07 $653.07 $185,254.28 06/30/14 $9,500 $10,188.99 $688.99 $185,943.27Explanation / Answer
Bond par value 190,000 Issue value 183,982 Discount 6,018 Coupon rate half yearly 5% Effective interest half yearly 5.50% Amortization schedule Interset payable Interest expense Discunt Amortization Duscount unamotized Bond payable Carrying value bond Period 1-1-13. 6,018 190,000 183,982 6-30-13. 9,500 10,119 619 5,399 190,000 184,601 1-1-14. 9,500 10,153 653 4,746 190,000 185,254 6-30-14. 9,500 10,189 689 4,057 190,000 185,943 1-30-15. 9,500 10,227 727 3,330 190,000 186,670 6-1-15. 9,500 10,267 767 2,563 190,000 187,437
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